OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Eonorablo John ?. IfCmtlme, Commloaloner 

Dapmtmnt oi Dfmklng 

Austin, Tern8 

Attentlonr li, A. Janison 

i?ear S&c 

law v&ml hno 

olsl~n am? li 

partia:&ar at 

quotad p36Qug 
p&I-u;, ehrlres of the me:~bare plus the total onnh 

dop3slts of? tho mxbore with the credit union leso 

my and cl1 outnttnnding obliflatlons and llebllitios 

of tk audit unILon.* 

221, NO. 5) 

(Aots 1939, L6th tag., p. 

W'Tho -usation.hnn erlsan rs?ckrUing the laclolutlvo intent lncidest to tho loan llnlt of orodit 

tilonc, us tbt? len~u%~o uaod In Grtiola ?1,84a uhcm 

ca~oidcrud In t&e 13ght of the loan timit roferonae undar Artiole 2477 ep?oara to bo auoh 44 oaplble of two or three oo~~ntruotlons. %fJ are #ettlu~ out bslcm. the condensed balanaa uheat ot QIIQ 

of the ntnte ohnrtored 'arodI.t unions, and nil1 ap 

proolut~ spt~cifL0 ad?%44 from y:u al to the loaft 

limit of YA uuion whdm bulanaco &oat ia p1e eimvn. 

"Loami to :?anbore 

Cash on hand ana 

in banks 

FurnZture and Pixturso 

Total /teaate 

Aaaounte Peyeble 

Total. llebllity 

oq?Ltal a/o 

., 

L?lLb,h66 

57,643.V 

685.4~ 

ordluafvs of net 

mt UmTivideu, ?rofits 

Cueranty and/or Reserve 

12,697.60 

Puna e.403,50 

Total Li*biLFtiaa 

W&W~.~~ 

ë, l 

4 04 .50 

9195.939.14 

173;000.98 

X.637.06 

174,63%04 

2lU -- 

lb) nC~&tal anal riwnlua” 13. !wmil on .the sme 

formla 110 In (n) but the ce8h 8o:Jns~bs nnd Chc nmunt cl' 

th?p ;nld-up n&mm WQ nob tnalzlcd cwong tho 1l:~billtleo 

in tfio ~sub5mhond. 

(01 "Capital and surplus" ie th.o difforocoo obtslzml by doduota a subtrsl:and c33;)oaEd of alI, outztwdirq 

llabll.ltlos, lnoltiding woh iiQpBitS and th8 a;nnWIt oi^ tha 

paid-up ubtxms, I'roz a fAIu$nd bnaod on total escot8. 

(d) "Capital and f3wptu3 ” is’ bnecct on thn onme 

rordla PIG in (of abut the omh dogonlts nnU the mount oi 

the ~miu-up ahr,res me not inoludad nnotu tho liabllitiou. 

in the oubtmtcnd. 

. 
lionoral. Jolii ~~2. ilO.!dnns, Com&3nlonor, Page 5 

rldiouloU9 results nlnco It is 173thomLZ0ol,ly LPpomlblo for 

the dlfforenco thoraby obtainail to ix cmra than zero, cad, 

in tho p..roat nojorlty 0: 0~309, such dlfforonoe sill bo loos 

than 20ro. The nbeurdity of sunh n Co"ornti,a 3.0 furthr rovealad whun WQ oonalder that Artiole 2464, V. A. C. z., ea 

acendod, Units borrmlna by a Credit ljnJ.on to 19; of *oapital 

and surplus", total imootronta to 25/, of thio mount, ona 

lndividanl lnvc5t~~onto to 5; of this S~QU-0. IT thl0 fom.Ula 

wore to bo adopted, RO would bo forced to my that a Credit 

Dnlon’e po%?er to land, to borrow, mid to invest are all masurod either bye e tractional pert of zero or by a fkaotionol 

pnrt of a aogative anoUr&, 

?kploy~Mt of olthez formla (0) or (a) would a%om 

to be prooluded by the fnot that aooh of t&ode fomrrloe %.?1- 

ploys ntctaleooota~~ 08 a ninucod vheraao Artiole 2@.2a, 

V. A. c. S., as msndod, apcoiflcol.ly r%quirao that tho &nuenu bo "the sp,~rog%t% of the paid-up sharoo ot ths mabors 

plus the total aao!~ dopoaltcP. Althnurh the term *oa~lt41 

nn3 surplus" is aoF-atima usaQ a8 synonymus with Vot*l assstfP suoh usnp la yrooluded In this problen by the opooirlo 

Zanguege of the above-oitod atatuto. 

Forclula (b) eiz~loys a ulnuend ahioh ooufom to 

the atetutory requlrenent but ueeo n oubtmhond whloh 8x1 

OlUdCi8 the nnount ot the @~id+i&~ shares end the oaob, doposit 

from tho *outstanding obligations a~3 l.iabilitlos". In the 

bnlnnoo ohaet whioh you h%oe subtitta5, the sffaat of this 

axoluslon IP to m&e "aaaounte payable" the only iton in the 

oubtmlroml. Aa mill be shown below, ~'0 feel thnt %ccounta 

p,ayuble" 6x13 not Oonstltutcj tha solo outottinafw liability 

of tJ113 Unlonj omaoquontly,,we are likcralae Poroscl to reJeoO 

this formlo. 

An CM be ts~en iron tha nhovc~,'tha cllffloulty in 

thin probloz ocmtoro around the Uctomlnntlon of those items 

which nsy be olnosod ae ~outatmdin~ obli@tions am? llnbllitlesw or the Union. Te shall oonsfdor the varloue pooslble 

itens In thls bolcnoo oh%& eoparatolyt~ 

3n.m :.acount (ma-q3 Shnroo)r Xnoe credit Unions . 

of tho kind uudor uo&idoration tire qorporntions (Artloles 

2463 cm,d 2464 V. .A.~ C. ii., as i2nol3aeu), their s.harfx-9 are ~,ovorned by the prlnoiples .(Ienorally appl1cmbI.o to shcx6s ol! oarpornto 8tooL It lo well rao5&z%d that the holaor of siloh 

0 ohare lo not in the aame .posltlon &I the holder Of LUI obligatioo or llnb~lity of a oorporation., The shareholder has 110 
IIonorttble John f. KaAdamo, Commissioner, Page 6 

diroot intorost in or &lain to the assets of the oorporatlon. 

Although the offioors of the oorporation OWJ oortain duties 

of loyalty and cure to tho rharoholdor, the corporation par . 

se oc:oo him nothing. Dos?lte the fact. that a shareholder 

does poasoso substantial riehtn to the surplus of a oorporation, once aiviqends are properly deolared, and a08pit8 the 

fact that ho is ontitled to a pro rata shtme of the corporate 

assets upon dissolution (see Artlole 2l+@, V. A. C. S., as 

smcndod), thwa ri&te are of an inohoato nature so lone as 

the organization I5 a goin5 oonoorn and so long as no spoolfio 

proporty has boon allocated for ths paymontof dividends. 

~~oAlli.stor v. ~ollpoo Oil Company, 90 S.3. (2d) 171, 176 

(sup. Ct.); 10 TQX. Jur. 780-7S1, SOD. 152-153. Conaequontly 

tho oharos of Crodlt Unions do not oonstituto "obligations 

or liabilitiosw nnd the amount of ouoh shares is properly oxoluacd from the subtrahend in the rosolution of this problem. 

Depodts bv ?.ln,mharn t-m& fndividunl l.eaR,er Bnlanoos: 

Credit Unions are outhorizoci to rocoivo the oash dcpooits of 

their members (Artlclon 2462 and 2lt66, V. A. 0. S., a3 txtwmded), 

and ouoh dopdoito apparontly are roooived not as cajital invostmonts by tha mmbbors but as mere c7eposita oomporable to 

those reoeived by ordinary savings and oommercial banks. Such 

doponits are plainly direot obligations and liabilities of the 

rooeiving organization. As auoh they should be included in 

the subtrahend under Artiolo 2484a. %8 have been infomod 

by a representative of your Oopartment that the "Individual 

LOaS0r 3alanccs" aooount of this company roproscnts oash 

deposits by mambers whioH have been segregated from the general 

deposit oocount. Connoquently this account and the oash doposit aooount will be treated the S~JW for pwposos of this 

opinion. 30 wish to noto, honeoar, that ne are not here passing 

on the status of the Individual LeQor Balances aocount when 

suoh sooount contains itoms other than segrogatad oosh doposits. 

The status of cuoh aooounts as 

oblir,atlo and the ncoeasity for their inelusion in the subtrahond is too patent to require difioussion. 

Pot Unclividocl Profltsr Until dividend8 are lawtully deolared and a portion 04 the not profits Is nllocatsd for 

the satisfaotion of suoh dooloration, nat profits oomtitute 

mwoly an aoorotion to the oapltal investment of the nhareh&de;~oua;3are to be traated ocoordin@.yr We 10 Tex. Jur. 

Consequently suoh profits do not reprosent obli&tions or~llablllties of the Union,. Ilotioe, however, that 
-- 

-<.ti 

Honorable Cohn 6. Ko.U.oms, Coztixionor, l?age 7 

divldendc Bccl::rod but unpaid nro direct obligations of the 

doclaricg orgudzation imd should be ir,oiudea in the subtrahend. 

ClKliTlIlty tlnd/oP KosorVe 7UnC: The guaranty fund of 

a Credit Union is cstnblishod rud t~iaiut4lnoG under Artfole 

24(32 ” to moot oontingonoies or losses in its business':. Altbautfi such funds erc reserves for possible liabilities, oblL:utions or losses, thqi in no oense represent "outstandingW 

obiigaticns or li.abillties; rather they cxxtitute a sagrot;Eet portion af surplus kept inviolate from fiividana dcolsrarL . 

Thus, followln~ the dofinltion oontained In Artiole 

246413, the i “ccipital ad ourplus" of the instant Credit TJnlon 

is obtained b.q a&&in.~ the 05z3h c?ei!oslto (in0lubi.a~ lodger 

bolar;ccs) to t1\3 a:!ouut of the paiil.-up sharas anil ded~lotlng 

tharofran ths SW of tiio'cash deposits (iooluciing ls3cer balancss) &id &ho 4CO0UiItQ :~aFutlo. Ten ocroont of the tiqure 

thus sbtnl.xd (10,: of :113,034.& or C11,303&6) represents 

the loan limit of the Credit ihion under oonsiderati%. 

The l&n limit thus obtrlinod may secun unduly high 

in view of ttie faot thfit such iU19ons hvovrsdly were ore~ted to 

proYido '!1;:05cratc Ibans* (Article 2451) and in view qf the 

EGllOra;\l ocnSsrlatis& Gf the Articles ~OVeTiliI~~ the creation 

and operation of such 'Jnians. ?~orevnxr, the faot th%t the 

old~losn limit of $l,GOO vxls oh;U&qd in 1939 (see Artlcle 

2477, suprs) td the present !'Tv;o I:ianr:roit Dollars r;r ton >,nr 

cent of the on,;itsl and. surnlus, nhiohovor siwll be the lrxp 

eP may ~011 in:iioxte an inteilticn thr~t tho new 1Mt bo ovan 

striotor thsn thnt'formerly ~nxvailin&. However, if such an 

intention wore aresent at the the that tho present loan limit 

was established, the languuge need to express it uao singularly inapt P3r that purpoee. 

are 

Trmting that this Pully answers your inquiry, we 

Yours vary truly